China Tax/Business News Flash

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Jul 2013, Issue 18

Does simplified tax clearance for remittance mean relaxation in handling tax matters?

Currently a Tax Clearance Certificate (TCC) is needed for outward remittance of certain service trade payments. While the intent of the TCC mechanism is to safeguard tax collection on outward remittances, it has caused (to a certain degree) undue delays and sometimes even hurdles to such remittances. The State Administration of Taxation (SAT) and State Administration of Foreign Exchange (SAFE) have recently jointly issued a Public Notice [2013] No.40 (Notice 40) to set out guidelines for a record-filing system for certain outward remittances. With effect starting 1 September 2013, this record-filing system will replace the current TCC requirement and simplify the tax compliance for outward remittances. However, replacing the TCC mechanism with a record-filing system does not mean that the Chinese tax authorities are relaxing its tax administration for outward remittances. Instead, their focus will now shift from pre-remittance approvals to daily tax administration and post-remittance examinations. Relevant domestic payers and overseas recipients should still pay the same level of attention to such outward remittances as before, as there may be penalties and surcharges should the tax authorities discover that taxes have not been paid in full in their post-remittance examination.

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